Startup Sunday Season 2 Episode 21 (InMobi)

InMobi, a mobile advertising and discovery platform provider has been in the news for various reasons: A 950,000 dollar fine for ignoring privacy policies; talks of acquisition by Google or Microsoft; senior level attrition and a possible IPO. Against all odds, the Indian unicorn recently celebrated its 10th anniversary. Let’s unravel the journey of India’s second profitable unicorn startup (after MuSigma)

Naveen Tewari cofounded mKhoj with fellow IIT alumnus Amit Gupta, Mohit Saxena and Abhay Singhal. In 2007, mKhoj started as a SMS-based search and monetization business. The idea was born with a vision to change the way advertisements are seen on mobile devices. In 2008, mKhoj was enhanced from SMS-based services to mobile advertising and was rebranded as InMobi.

Over the years, it grew from a single- bedroom flat in Mumbai onto a global arena where it competes with Google, Facebook and Apple in the market for data-driven mobile advertising. The company was recognized by MIT Technology Review as one of the 50 Disruptive Companies of 2013. InMobi was also recognized among Fast Company’s “2016’s Most Innovative Companies in the world”

What does InMobi do?

InMobi is the largest mobile-first, independent advertising platform in the world. It has reached over 1.56 billion unique mobile devices worldwide. With a vision to improve users’ lives by enabling them to get the most value from mobile devices, InMobi provides a reach larger than any other channel of advertising and a way to precisely target the audience. InMobi pioneers mobile discovery through personalized advertising experiences. It is a global mobile advertising and discovery platform that enables consumers discover new services and products by providing relevant, contextual, and curated recommendations on mobile apps and devices. It provides advertisers with an opportunity to engage consumers on mobile to build consumer loyalty and maximize lifetime value.

InMobi offers a perspective about customers to advertisers, by sifting through data that users constantly generate. For instance, if a person downloads an auto app, chats about it to friends and visits a car showroom, InMobi combines the disparate information to build a profile of a person looking to buy a car.

Revenue Model:

InMobi is a marketplace for publishers and advertisers alike. They generate revenue on a Cost per Thousand Impressions (CPM) basis. The business works on a 40% gross margin at a very large scale. InMobi has tied up with over 30,000 app developers, across verticals of gaming, social, news, utility, entertainment among others to help them monetize their apps using mobile advertising.

InMobi’s advertisements are delivered to 759 million mobile users globally every month, second only to Facebook. It can also now display video ads, earning revenue from advertisers every time a user views or clicks on an ad.

InMobi features amidst the top 5 players in US, China, Southeast Asia and India. The largest revenue-generating market for InMobi is United States. China is its second-largest market, representing about 28% of overall revenue. Its growing business in China, which works on a partner and reseller model, is contributing significantly to revenue growth.

Rounds of funding:

mKhoj got an initial seed funding of $500,000 from Mumbai Angels. Soon they ran out of money and had to do the rounds of venture capitalists (VC) and private equity (PE) players to convince them of potential success. In 45 days between December 2007 and January 2008, the founding team met 21 prospective investors, but not a single VC in India was interested.

By February 2008, they had only $2,000 in the bank and less than a week before the startup would have to shut down. That’s when Naveen Tewari decided to travel to the US and he began cold-calling possible investors In San Francisco. Within a fortnight, he got Kleiner Perkins Caufield & Byers (KPCB) and Ram Shriram of Sherpalo Ventures to jointly invest $7.1 million in Series A funding. Within two years, it got series B funding worth $8 million from the existing funders.

The $200 million series C funding came in 2011 from Japan’s Softbank Corp. It positioned InMobi to fully capitalize on the opportunity through substantially increased product innovation, deeper market penetration, and acquisitions across the mobile ad value chain.

The road ahead:

Naveen Tewari said “We are a data company not an advertising company.” With 500TB of data processed everyday at InMobi, it is indeed a technology powerhouse.

To ensure that it continues to compete at top level, InMobi has launched several innovations in recent times. It offers technology for app developers and mobile publishers to deliver ads that mimic the feel of those being already being used by a consumer.

While ads popping up on a mobile device can be intrusive, experts estimate this is a business that will only grow. According to Gartner, Global mobile advertising spending has increased from $18 billion (Rs 1.1 lakh crore) in 2014 to reach $41.9 billion (Rs 2.56 lakh crore) in 2017.

Mobile ad sales are rocketing and InMobi will likely benefit from it. However it faces stiff competition from the two dominators, Google and Facebook. InMobi logged a profit of around $10 million in the last quarter of 2016 and expects the streak to continue in the years to come.